WMI says enter into conditional commitment letter with KKR

December 9
10:34 AM 2013

WMI Holdings Corp. today announced that KKR & Co. L.P. has entered into a conditional commitment letter to make a strategic investment in the Company, dated  December 8, 2013.  

Subject to the completion of definitive documentation, due diligence and the terms and conditions of the Commitment Letter, KKR has agreed (i) to purchaseapproximately $10.55 million  face amount of convertible preferred stock of the Company at a price per share of $1.10 convertible on a one-for-one basis intoshares of common stock of the Company, and (ii) commit to purchase up to $150 million aggregate principal amount of subordinated 7.5% PIK notes, which may be issued in one or more tranches over a three year period, each with a seven year term from the date of initial issuance, subject to certain terms and conditions. Substantially all of the proceeds from the Subordinated Notes, if and when issued, would be used by the Company to fund future acquisitions. Upon consummation of the transactions contemplated by the Commitment Letter, KKR would receive five-year warrants to purchase approximately 61.4 million sharesof the Company's common stock, 30.7 million of which would have an exerciseprice of  $1.32 per share and 30.7 million of which would have an exercise price of  $1.43  per share. KKR would also have the right for three years toparticipate up to 50% in equity offerings up to an aggregate of  $1Billion by the Company subject to certain limitations, including a cap in ownership by KKR (and its affiliates) of 42.5% of the Company's common equity. The Convertible Preferred Stock, if and when issued, will include the right for KKR to appoint one of seven members to the board of directors of the Company. The Commitment Letter terminates on January 31, 2014  in the event that the parties do notenter into definitive documentation on or before such date. The Company hasagreed to reimburse KKR for certain expenses incurred by it in connection with the Commitment Letter and has also agreed in certain circumstances to pay KKR atermination fee equal to  $2 million.

Michael Willingham, Chairman of the Company said, "We believe this investment from KKR will provide WMI Holdings with a compelling opportunity to create meaningful shareholder value. KKR has a global network of relationships, deep expertise in transaction execution, portfolio management, capital-raising, and operational improvement, and we believe a partner with these capabilities will augment our ability to execute on our stated acquisition strategy."

Tagar Olson, Member and Head of KKR's Financial Services team stated, "As a firm that invests across a wide range of asset classes, we think KKR is well-positioned to serve as a long-term aligned capital partner to the Company. We are looking forward to being a strategic investor in WMI as the Company grows and diversifies its platform in the coming years. We believe there is a compelling opportunity to help build shareholder value as a significant investor alongside WMI's existing shareholders."

Blackstone Advisory Partners L.P. is acting as financial advisor to the Company in connection with the transactions contemplated by the Commitment Letter. AkinGump Strauss Hauer & Feld LLP and Lane Powell PC  are counsel to the Company. Simpson Thacher & Bartlett LLP is counsel to KKR.   

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